The scorching heat baking large swaths of Western Canada and the United States is pushing up prices for spring wheat and canola to record highs, as hot and dry conditions are likely to hurt the harvests of both, making whatever survives more valuable.
The active contract for spring wheat — so named because it is planted in the spring and harvested in the summer — was changing hands for $8.34 US a bushel on the Minneapolis Grain Exchange on Tuesday, its highest level since 2013, according to data compiled by Bloomberg.
Prices for spring wheat were already high before they rose by more than 10 per cent this week. The reason is simple: the hot, dry weather parked over much of North America's west can produce stress on crops such as wheat, which can reduce both the quality and quantity of the harvest.
Spring wheat typically has a higher price than winter wheat because it tends to have a higher protein content, but that's in doubt this year because of the weather.
Spring wheat surges to record high
Only about 20 per cent of the U.S. spring wheat harvest is deemed to be in good or excellent condition right now, according to the U.S. Department of Agriculture. Last week, more than a quarter of it was thought to be OK. This time last year, almost 70 per cent of it was considered in good condition.
According to the U.S. Wheat Associates, the export market development organization for the U.S. wheat industry, "Drought conditions have worsened, raising abandonment and yield concerns."
Phil Flynn, a commodities analyst with Price Futures Group in Chicago, says spring wheat prices are booming because it has been hot and dry just about everywhere it's planted in the U.S. this year.
"A short crop is increasingly likely," he said. "More rain is possible later this week, but spring wheat areas could get shortchanged again."
'Worst crop in history'
It's the same story in Canada. Stephen Vandervalk, a grain and oilseeds farmer near Calgary said in an interview with CBC News that this year's crop is "looking like the worst crop in history."
"Southwest of Calgary there's essentially nowhere with nice crops," he said. "Some areas there's going to be nothing."
The situation with canola looks even worse, he said, because it's coming on the heels of what was in retrospect one of the best years ever for the crop.
Canola dislikes hot and dry weather almost as much as spring wheat does, which is why Vandervalk thinks this year's harvest will be a "wreck."
This year's canola harvest will be much smaller, which is why the price of what's available is skyrocketing. The spot price for canola hit a record high of more than $800 per metric tonne on Monday. That's the highest price on records that date back to 1982, according to Bloomberg data.
WATCH | Why hot and dry weather is so bad for canola in particular:
Personally, Vandervalk says he will be going from having 300,000 bushels of canola to maybe 70,000 bushels, but he knows many other areas will be even worse. "They won't even harvest."
The heat and lack of water is bad for crops at the best of times, but it's made worse by what those conditions tend to bring.
"Hot and dry like this, the bugs are completely out of control," he said.
"That's the thing with mother nature, when it goes bad it goes really bad."